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May 20, 2015

Property tax rebates deplete Town revenue

As published in The Erin Advocate

When Erin politicians get tired of complaining about the property assessment system, which forces us to pay higher county taxes, they can turn their attention to a variety of other alleged injustices inflicted by the provincial government.

There’s the ever-popular “infrastructure deficit”, in which municipalities have built way more stuff than they could ever afford to maintain, especially with residents forever fantasizing about less taxation.

The Association of Municipalities of Ontario estimates that actually fixing all the roads, bridges, sewers etc. would cost $60 billion. If property taxes alone were to maintain existing obligations, plus eliminate this deficit, the AMO estimates that municipal taxes would have to increase 19% per year for 10 years.

So do we let some of our infrastructure crumble, and ultimately make do with less? Do we pay up through higher taxes and debt charges? Do we invite private enterprise to wave its magic wand? Like good Canadians, we’ll probably compromise and do a little bit of all of that.

Faced with a problem that cannot be solved within the term of one government, the province just chips away at it. They dole out infrastructure funding erratically and upload some of the costs previously dumped on municipalities, but it is never even close to enough.

Erin is at a disadvantage in this game, being labeled a wealthy community. We have low debt, high taxes and very little income from industry. We have lots of farms and natural areas, but the tax revenue they could generate is severely curtailed by provincial policy.

The latest complaints at the Erin council table have been about the 75% property tax reduction the Town is required to provide for qualified farmland (846 properties) and managed forests (117 properties), as well as a 100% exemption for 721 pieces of conservation land.

Farmland qualifies for the rebate if it is actually farmed, generating at least $7,000 in gross income per year. Farm residents still pay the regular rate on their homes, plus one acre, but obviously their fields do not use municipal services. With farmland values increasing faster than residential values, the Ontario Federation of Agriculture is lobbying for a larger percentage reduction.

The benefit used to be a rebate paid by the province and shared through income taxes. It started in the early 1970s when farmers were being hit hard by huge increases in the cost of education – another service not used by the land.

The Progressive Conservative government of Mike Harris did download many costs to municipalities, but it also assumed a greater share of education costs and took over setting education property taxes. These remain a much lower share than they once were, now just 17.2% of the Erin tax bill, with a 0% increase this year.

When Harris shifted the farm rebate to municipalities in 1998, provincial grants were supposed to cover the cost, but they now only cover about one third. Throughout Wellington County, that is lost local tax revenue of $25.5 million per year, at a net cost of $487 per household.

Finance Director Sharon Marshall estimates that if the province took back responsibility for the rebates and Erin could charge regular taxes on all property, the Town tax rate could decline by 11.6%.

Mayor Al Alls says city dwellers are reaping the benefits of protecting the water, air and local food production, but that the burden of supporting the system falls unfairly on rural municipalities.

“It’s a big hit on our budget ­– we’re paying for it,” said Alls, noting that a large share of electoral support for the Liberal government comes from large urban centres.

“The current provincial government doesn’t get their power from us,” he said at a recent council meeting. “Nothing’s going to change until that changes.”